Q&A: Land-use expert's 'anti-Houston bias' faded

1of 7Patrick Phillips, CEO of the Urban Land Institute, before speaking at a Junior League luncheon in Houston, TX, Nov. 27, 2017. (Michael Wyke / For the Chronicle)Photo: Michael Wyke, freelance

2of 7Patrick Phillips, CEO of the Urban Land Institute, before speaking at a Junior League luncheon in Houston, TX, Nov. 27, 2017. (Michael Wyke / For the Chronicle)Photo: Michael Wyke, freelance

3of 7Patrick Phillips, CEO of the Urban Land Institute, says Houston will deal with its challenges.Photo: Michael Wyke, freelance

4of 7Patrick Phillips, CEO of the Urban Land Institute, before speaking at a Junior League luncheon in Houston, TX, Nov. 27, 2017. (Michael Wyke / For the Chronicle)Photo: Michael Wyke, freelance

5of 7Patrick Phillips, CEO of the Urban Land Institute, before speaking at a Junior League luncheon in Houston, TX, Nov. 27, 2017. (Michael Wyke / For the Chronicle)Photo: Michael Wyke, freelance

6of 7Patrick Phillips, CEO of the Urban Land Institute, before speaking at a Junior League luncheon in Houston, TX, Nov. 27, 2017. (Michael Wyke / For the Chronicle)Photo: Michael Wyke, freelance

7of 7Patrick Phillips, CEO of the Urban Land Institute, before speaking at a Junior League luncheon in Houston, TX, Nov. 27, 2017. (Michael Wyke / For the Chronicle)Photo: Michael Wyke, freelance

Patrick Phillips admits he didn't love Houston when he spent time here about 15 years ago to help plan improvements to Buffalo Bayou.

But as he got to know the place, and saw the city's commitment to improving the quality of life here, he became a fan.

Phillips, CEO of the Washington, D.C.-based Urban Land Institute, a national research group that studies land use and real estate development, visited Houston recently as part of a 10-city road show to promote the group's latest report on emerging trends in real estate. He had his pick of cities to visit.

He spoke to the Houston Chronicle before presenting the report's findings to the ULI's local chapter.

Q: Why did you pick Houston? Why was it on your top 10?

A: I like Houston. I have a lot of friends in Houston. I wanted to come down partly because we're in this post-Harvey period. There's been a lot of discussion here and nationally of how can we help, what's the mood in Houston and is the situation ripe for us to add value? Can we help facilitate any productive dialogue about what happened and the future of land use?

Q: So where have those talks led?

A: Our ULI members in Houston believe there are a couple things we could do. With the Astrodome, we brought in an expert panel and took a look at the reuse of the Astrodome. That's called our advisory panel. We pull in members from our global membership. It's a small panel with a fairly defined scope of work. We did one after Katrina, Super Storm Sandy and other natural disaster situations.

Another option is where we work more closely with our local members to address issues. There are some smaller communities that have expressed an interest in having that kind of assistance.

And we have a pretty active program in urban resilience which really collects best practices at a global level.

Q: Moving on to the report, Emerging Trends in Real Estate, Houston fell drastically on a list of places to watch. It went from No. 1 in 2015 to No. 60 this year. What were your impressions of that and has any other city ever fallen so much in such a short period of time?

A: Cities do fall, and they rise very quickly, too. That's partly a reflection of the nature of the methodology. Basically we go out and talk to people about their sentiments on investment or development prospects. Some of those opinions are well-informed, some are not. Some are very much a gut feel by the respondents.

I had colleague once refer to this process as a beauty contest. Things come in and fall out of favor very quickly. I have a tendency to believe the opinions are somewhat overstated in the report.

It's an interesting phenomenon where Houston is. Keep in mind the research was done before Harvey. It'd be interesting to think about how that either would have exacerbated its decline or mitigated it. I'm not sure which. The storm in some ways makes Houston a very attractive investment opportunity partly because prices have been compressed now a little bit. So the contrarians kind of come back to a place like Houston under these kinds of circumstances.

But what I think it really reflects is the economic hit Houston took primarily related to oil and gas.

Q: The report asks some good questions about Harvey: Will growth continue? Will residents displaced by the storm stay? Will we be able to attract new people? What do you think should be our biggest concern?

A: There's a short-term concern and a longer-term concern. Looking at it from our perspective at ULI, I think the concern is how do you find the right balance point between a place like Houston, which has had a fairly light regulatory touch on land-use issues for a long time, and there's been some obvious benefits in terms of affordability and economic mobility and the vibrancy of the local economy. But we've now seen some vulnerabilities associated with that as well. I know the pendulums swing back and forth, and we may face a period where there's a discussion about regulation and that will, of course, be controversial. But I think a lot of other places could learn about the experiences Houston will go through in trying to reset where that balance point is.

Q: Houston has long been known as this city of opportunity and affordability. The affordability piece has fallen off a bit as real estate prices have risen. That, combined with now having more of a reputation as a city that floods a whole lot, are we doomed?

A: I don't think Houston's by any means doomed. This is a really powerful regional economy, one of the nation's most important areas. I remember a similar discussion after Katrina - and New Orleans plays a different role in the national ecosystem of cities and is much smaller - but there were similar sorts of discussions of, Will it come back? Of course it did and continued to thrive, but it faces challenges.

I think Houston will deal with this. It's a hard thing in our business because it's so capital intensive and assets are so long lived and so changing the rules, if you will, and in this case nature seems to be changing the rules, but it's a really hard thing to deal with because people will then retreat. They won't invest, they won't insure, they won't relocate. All those things will be called into question. But you have to plod through, and Houston like other cities will begin to address these things, and the mindset will change.

Also, and this may be unfortunate, but in America our memories are short, and I think the overall business ethos in Houston and the political dynamics suggest to me that Houston will continue to be a vibrant place that welcomes business activity and welcomes entrepreneurial investment.

Q: ULI is a lot about quality of life. What does Houston lack on that quality of life spectrum?

A: Well, the weather's tough in the summer. About 15 years ago before I took this job, I was a real estate development and real estate economic consultant and was working at one point in Houston, Dallas and Austin on major waterfront projects, so I had this opportunity to see these three different places and get to know them a little bit.

I came in, I'll admit, with kind of an anti-Houston bias. And it really stems from the physical realities of Houston. It's flat. You have some jarring juxtapositions. The infrastructure is prominent, the highways, the freeways, and the land use along the interstate is not the most attractive. But it didn't take long to overcome that, and once you get to know the place, all the other positive attributes come forward. And other places that might be more attractive, you learn that they're class-conscious or closed from a business standpoint. And Houston really has some attractive parts that aren't as visible.

Nancy Sarnoff covers commercial and residential real estate for the Houston Chronicle and the paper’s two websites: Chron.com and HoustonChronicle.com. She also hosts Looped In, a weekly real estate podcast about the city’s most compelling people and places. Nancy is a native of Chicago but has spent most of her life in Texas.